Investors to the rescue of housing market

Real estate investors will outnumber traditional borrowers 3 to 1 during the next two years, a new survey says, helping clear millions of repossessed properties from banks' books and pave the way for a recovery.

Reporting from Washington — Who is going to lead the housing market out of the doldrums?

Certainly it won't be move-up buyers. People who already own homes are not likely to be venturing forth to find another one until they can sell their current residences. And with all those foreclosures gumming up the works, it's tough to stand out in the crowd unless you're willing to give your place away.

It probably won't be first-time buyers, either. Despite the most affordable prices and loan rates in ages, rookies have shown a marked propensity to remain on the sidelines. After all, why rush? Who wants to buy a house, only to see its value go down? Why not wait until we know values have hit bottom?

That leaves investors. According to a new survey from the California outfit that operates the official website of the National Assn. of Realtors, real estate investors will outnumber traditional borrowers 3 to 1 over the next two years.

Investors are sometimes thought of as bottom feeders who pick off properties from financially troubled sellers who see no other way out. And while there most likely will be a bit of that going forward, this time around the main prey will be banks, not strapped consumers.

That's a good thing. The overwhelming consensus is that before the sinking housing market can right itself, banks must rid themselves of millions of houses and apartments they've already taken back or will repossess in the future. Get them off their books and into the hands of users. Only after houses under duress are cleared from the decks will housing find its footing.

Investors often are in and out in a flash, buying a place, splashing some paint on the walls, maybe updating the appliances and then reselling at a good, if not huge, profit. Again, while there will be some "flipping" in the future, the survey by Move Inc. found that most investors will buy and hold for at least five years, long enough for many neighborhoods to stabilize.

Moreover, nearly half say they plan to invest their own time and energy to repair, maintain and improve their properties. And 30% say they'll hire a contractor to do the work.

These would-be investors still expect to reap decent returns. Nearly half of the 200 investors queried — a statistically relevant sample — expect to make a profit of 20% or more when they sell after their five-year or longer hold. In the meantime, most will put their investments to work as rentals. Some may even live in their properties until they jettison them sometime down the road.

In other words, says Move Chief Executive Steve Berkowitz, today's investors, many of whom are new to real estate, are not your stereotypical deal-driven sharks. Rather, he says, they are mostly entrepreneurial individuals who "will make vital contributions to local communities by investing their own money and sweat equity [that] over the long run will help improve housing stocks, home values and property tax bases in thousands of local communities."